Performance Management: The Complete Guide

Learn about performance management and how it helps employees create better goals and enables organizations to implement new strategies to achieve business success.


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What is performance management?

Performance management is defined as an ongoing process that aims at identifying, measuring, and developing the performance of individual employees at the workplace. The process requires constant communication between managers and his/her team members.

Employee performance management’s entire objective is connected with the overall mission and goals of an organization and how an individual can add value to it. It provides feedback, accountability, and documentation for the performances of individuals.

There are two critical elements in performance management:

  • Continuous observation and communication
  • Align it to the organization’s mission and goals

Employee performance management is not the same as performance appraisal. Staff performance management relies on the detailed perusal of how an organization’s employees have historically performed and if there are any efforts from the employees’ end to improve their performance in the future.

If you are an effective manager, you wouldn’t just give feedback; you will also ask for one. That is how the process will be effective for all. The same is not with performance appraisals, it is a one time process and usually conducted every year. Performance management helps managers understand the needs of their employees and how best to fulfill them.

Components of Performance Management

There is no thumb rule for a workforce performance management system; every organization may have a different take on it. Many organizations have been able to develop an effective system over their years of operation. Remember, there is not just one way of doing things. Depending on the organization’s goals and mission, the system may vary.

In an ideal world, a staff performance management system includes the following components:

1. Review from the manager or supervisor

This is a process where an employee can access his/her strengths and weaknesses, training needs, etc. based on the review provided by the manager. It is essential to do a SWOT analysis here, as the manager’s evaluation can be used to identify areas that align with the organization’s goal and mission.

2. 360-degree feedback:

360-degree feedback is probably the most critical component of performance management and also the most valuable addition. It is a method where an employee receives feedback from his/her manager, peers, subordinates, top-level management and also gives feedback to him/herself. This provides an employee with a comprehensive overview of their strengths, along with their weaknesses. It is a method that encourages constructive feedback and is being increasingly practiced by organizations as a part of the performance management system.

3. Employee engagement surveys

Conducting an employee engagement survey in your organization is an effective way of understanding what matters the most to the employees. As the name suggests, the primary reason to conduct this survey is to get an insight into employee engagement levels. There is no set way of measuring employee engagement; however, with the dedicated frameworks designed by Workforce, you can now analyze and measure the end-to-end process. The report, in turn, highlight areas of improvement and development for the employees.

4. Pulse Review

Pulse review as the name suggests, measures the pulse of the organization. It is an excellent tool to collect feedback that empowers and encourages employees to celebrate their strengths and identify their areas of development. Pulse review app designed by QuestionPro Workforce is one such tool that simplifies dialogues and facilitates the sharing of feedback amongst the employees.

5. Goal setting and Alignment

This, again, is a hugely important component for any organization. Research suggests setting SMART goals lead to higher performance than setting no goals. Therefore, the bottom line is to set goals and achieve more. That’s not all; goal alignment is equally important and is a process that will encourage your employees to work collectively towards the common goal of the organization. Your employee, performance management procedure, should be designed to set, track, and complete individual and team goals.

Performance Management Process

Performance management is a process to show appreciation to your employees. It is not a process to get back at your employees for something that they might have done in the past. This is not the time to dig graves.

If you search “performance management” on Google, you will roughly find 1,76,00,00,000 results in under a minute, all these primarily talk about a four-step model: Plan, Act, Monitor, and Review. All these four steps are perfect opportunities to show appreciation. Here is how:

  1. Plan: Although planning may not look like an excellent opportunity to appreciate your employees, however, this is an excellent time to break the ice. Have a sincere conversation with them regarding how they can help achieve the overall goal of the organization and how they can benefit from the entire process. An organization needs to have faith in its employees, but it is equally essential for the employees to have confidence in the organization. Having someone believe that their abilities are powerful truly is a sincere form of appreciation.
  2. Act: There are so many employees who constantly feel that they are not given enough feedback and that doesn’t solve the purpose. Employees complain about not having enough communication with the managers during the projects; they say they either hear from them during the start and then towards the end of the project. And this exactly is a missed opportunity. You have lost the chance to communicate effectively and walk them through every step. The key here is to act!
  3. Monitor: The word monitor sounds a bit strict! It looks like the principal of an institution is out for an inspection and makes sure nobody steps out of line at any given point in time. Relax! Running an organization is not the same as running an institution where you need to discipline kids to make them realize their mistakes. Here you are dealing with adults, and it is essential to observe than to monitor. A manager who can use this step judiciously has made sure the retention of employees. It is a great place to talk about energy, commitment level, goal achievements, etc. with employees.
  4. Review: This is the final step in the process. In today’s world, reviews are mostly result-oriented, which is good, but this is also a process where you can have a productive conversation with your employees and discuss accomplishments. This is a significant step to celebrate an employee; it brings calmness at the time of stress. Appreciate an employee for their qualities.

Why conduct Performance Management Surveys?

Many organizations conduct annual performance management reviews; this is not ideal and should happen more frequently. Let’s look at a few reasons for conducting regular performance management surveys.

  • Disengagement: Performance of disengaged employees takes a hit, and there are several reasons for that. Creating a questionnaire about this and getting responses can shed some light on why employees are disengaged. Corrective measures in that regard can improve engagement levels, thereby improving staff performance.
  • Productivity: Not every survey has to be for all of your employees. For example, this can be especially for your managers. Get them to fill in the questionnaire to get information on their team’s productivity. This data will help you look at team dynamics and their performance and arm you with data to improve it.
  • Goals management: Are managers looking into goal management? Are all goals time-bound? Goal management, as crucial as it is, is often overlooked by managers. Gathering information about this will help you manage and align individual and team goals with organizational goals.
  • Succession planning: Performance may dip or improve depending on a variety of factors. Collecting information about this is helpful in succession planning, an essential aspect of employee experience. It also aids in team management, talent acquisition initiatives, etc.
  • Infrastructure: There are several factors for the poor performance of an employee, and one of them can be tools and support. If an employee does not have the right set of tools needed for the job, their performance may dive. Conducting a survey helps identify and eradicate such issues.

Purpose of Performance Management

Performance management is often a misunderstood concept; most organizations tend to confuse it with performance appraisal. But there is much more to it. Performance management is about getting results. It is about helping people identify their areas of strength and potential improvement scope.

It is an approach to achieving a shared goal. Performance management is not only about managing individual achievements but also that of the teams. An employee performance management system, is used to identify, measure, celebrate an employee’s success at work. It serves the following purposes:

  1. Continuous feedback: Performance management is a mechanism for continuous feedback for personal and career development. It must be able to convey to the employees how they have performed. It is also advisable that these goals and targets are mutually set between the employees and their managers. This mechanism is all about effective and open communication.
  2. Development needs of an employee: An organization that gives importance to effective communication can understand the developmental needs of its employees. Developmental needs could be as simple as getting trained for a new tool or software, but at times it is essential.
  3. Employee Engagement: Ongoing employee development encourages them to perform better at work and also increase employee engagement while contributing to overall business success. The levels of satisfaction and retention of such employees are high. This means they are happy and motivated for a continued association with the organization.
  4. Align strategy: A well-designed staff performance management process helps employees organize themselves better. This process helps the employees understand how their performance contributes to improving the overall business success of the organization. The employees need to know what is expected of them to be able to perform better.

Advantages of Performance Management

Performance management helps not only in evaluating individual employees but also teams. This helps in understanding performance levels and raise them wherever necessary.

Following are the advantages of performance management:

  • Regular meetings: This process encourages performance-based conversations. Managers get busy with their daily activities, but it is essential to communicate with the team on a timely basis. This process encourages communication. Managers will need to provide feedback constantly to achieve collective goals.
  • Career pathing: This process is crucial for organizational and personal development. If done right, this helps carve a more significant path to success for both employees and the organization.
  • Identify risks: This process helps to identify under-performers. It helps in a smooth transition if the relationship needs to end.
  • Data collection and analysis: Since this process is documented, the historical records of all the meetings are stored for future references.
  • Employee engagement: Employees can be disengaged if their work is not satisfying, or it lacks learning and excitement. Performance management helps track that and lets you take corrective measures. You can always let your employees try something new or work in a function that they would like. This way, they are engaged, and you don’t lose a resource.